Sellers on e-commerce platform Amazon (AMZN) are increasing prices on a wide variety of products because importing goods from China is now more expensive due to new tariffs. According to SmartScout, 930 items on Amazon have gone up in price by an average of 29% since April 9. Many of these sellers are either based in China or depend on Chinese suppliers. Now, they are being forced to choose between raising prices or absorbing the extra costs, which is tough because their profit margins are already very thin.
It is worth noting that China now faces import taxes as high as 145%. While President Trump said that the U.S. is discussing a deal with China to reduce tariffs, Chinese officials denied this. Interestingly, around 25% of the price increases are from Chinese sellers, but U.S.-based sellers are also adjusting with layoffs and lower online ad spending. In addition, some are trying to move production from China to countries like Mexico and India.
However, raising prices on Amazon comes with more challenges than just a reduction in demand. In fact, some sellers are trying to delay raising prices in order to avoid being pushed down in Amazon search results, which can also hurt sales. Indeed, an Amazon spokesperson said that the company will continue to promote good deals through its pricing system. As a result, they are pausing some promotions, while stretching out their current inventories as long as possible in hopes that the U.S. and China can reach a trade deal.
Amazon Responds to SmartScout’s Research
Interestingly, though, in a statement to TipRanks, an Amazon spokesperson said, “The methodology of this research on a tiny fraction of items in our store is flawed, and any sensationalized claim that prices are increasing on Amazon are not supported by the research, which found that fewer than 1% of the limited number of items studied saw an increase in price, and 6% being the most frequently occurring price increase among these cases.”
The spokesperson also noted, “We have not seen the average selling prices of products change up or down appreciably outside of typical fluctuations across the hundreds of millions of items on Amazon, and we continue to meet or beat prices versus other retailers on the vast majority of items.”
Is Amazon Stock Expected to Rise?
Turning to Wall Street, analysts have a Strong Buy consensus rating on AMZN stock based on 46 Buys and one Hold assigned in the past three months, as indicated by the graphic below. Furthermore, the average AMZN price target of $246.70 per share implies 32.3% upside potential.
